Austerity Measure Protests Could Force Greece Into Default: How to Profit

The European Union said that the Greek Parliament must pass the latest round of austerity measures in order to receive the next installment of the 110 billion euro loan from the European Union and the International Monetary Fund. Without the next loan installment, the Greek government could run out of money to pay its debts by next month. However, it's still uncertain whether the EU's demands will be met because the austerity measures have proven extremely unpopular with a large portion of Greek society. The measures that the Greek Parliament is set to vote on over the next two days include spending cuts, tax increases and the sale of state assets. Previous spending cuts and tax increases have already hurt the Greek economy because with lower salaries and less jobs comes reduced consumer spending. The reaction to the latest round of austerity measures has been widely negative and threatens to bring Greece to a standstill. Thousands of rioters have taken to the streets, with many heading directly to the Parliament building in an attempt to prevent lawmakers from even debating the merits of the austerity measures or the repercussions of rejecting them. Once again, the country is also experiencing a huge general strike, which is affecting important sectors of the economy like the transportation and health-care systems. Unions have called for the 2-day general strike to show that the Greek people are not willing to accept the sacrifices that are being demanded of them by international creditors. Particularly upsetting to many Greeks is the fact that some of the new taxes are targeted at minimum wage earners. It's still not certain the austerity measures will pass because Prime Minister George Papandreou's Socialist party holds a slim majority in Parliament and he doesn't even have the full support of his party. Passing the measures could be political suicide for politicians and many are honestly questioning whether defaulting on the country's debt and demanding restructuring of debt on Greek terms might be a better alternative. There is recent precedent for such a move and many Greeks may be taking a closer look at how Argentina dealt with its debts when it faced a fiscal crisis a decade ago. There are a number of ways for investors to play the unfolding Greek tragedy. For those who see a Greek default as inevitable, the Market Vectors Double Short Euro ETN DRR is worth consideration. A Greek default may be the first of many, leading to other troubled countries like Ireland, Portugal and Spain defaulting on their debts, which could lead to the destruction of the euro currency. If this happens, Market Vectors Double Short Euro ETN (DRR) would climb as the euro dropped. Another play is the PowerShares DB US Dollar Index Bullish UUP because investors may flee to relatively secure US Dollar if the euro seems doomed. On the other hand, Greece may be able to step back from the precipice and put its financial house in order. If Greece passes the austerity measures and avoids a default, the CurrencyShares Euro Trust FXE should start moving upward as concerns over the future of the euro ease. The financial sector should also benefit if Greece and other trouble eurozone members are seen to be less likely to default on their debts. The National Bank of Greece NBG would be an obvious beneficiary of Greece avoiding a financial collapse. Optimists who feel that investing directly in a Greek bank is too risky might want to consider the iShares S&P Global Financials IXG ETF. The companies in its portfolio should move higher if they face less exposure to bad debts.